Severn Trent could face £70m fraud fine

Severn Trent could have to cough up to £70m today following the Serious Fraud
Office’s criminal investigation over allegations the water company provided
false data on leaks to Ofwat, the industry regulator.

In April, Ofwat fined Severn Trent a record £36m for knowingly misreporting
customer service data to cover up its true performance and for poor customer
service standards.

At the time, Severn Trent also pleaded guilty to two separate charges brought
by the SFO at the City of London Magistrates’ Court, relating to under-reporting
leakages in 2001 and 2002 which resulted in higher bills.

The matter was passed to the Crown Court for sentencing, due today. A third
charge, relating to incorrect leakage reporting in 2000, has been dropped.

The judgment will come as Britain’s four quoted water companies prepare to
report annual pre-tax profits in excess of £1bn – news that is bound to upset
customers facing higher bills. Severn Trent releases its pre-tax profits this
Thursday which analysts have predicted they could be anywhere between 10% to 12%
up on last year’s figure of £252m.

Severn Trent said that it was lowering bills to ensure it did not profit from
the misreporting. It has pledged to cut bills by £10.6m, or £2.40 per household,
over the next two years.

Ofwat will consider further action, including the possibility of more
stringent price controls, following the Crown Court sentence.